When a Supply Chain Becomes Too Visible
As Supply Chain Matters readers often know, the most admired supply chain in terms of overall capabilities and responsiveness is that which Apple has assembled. Apple has been a company that often surrounds itself in top secrecy. Secrecy on what products are in the development lab, what components are being developed by suppliers, or for that matter, what suppliers make-up Apple’s value-chain. The cloak of secrecy extends to severe penalties or economic hardship for any caught compromising a strict set of conformance standards. Within social and business media, the new prize of reader attention concerns harvesting leaks anywhere within Apple’s value-chain, and particularly its Asian based suppliers.
However, all of that is changing, and rather quickly. Apple initiated its own transparency to its supplier base with the new leadership of CEO Tim Cook. A litany of troubling incidents concerning labor unrest and consequent worker suicides occurring at Apple’s prime contract manufacturer, along with being targeted by labor rights groups, have motivated Apple to step-up the enforcement of its supplier social responsibility efforts, which included the identity of suppliers. Ongoing third-party audits of labor standards are a visible response to undesired visibility to supplier work conditions and standards. In the past two months, the highly hyped market introduction of the iPhone5, which could not satisfy initial consumer demand, along with more reports of labor unrest at plants located in interior China, have placed Apple once again under the looking glass, and has caused Supply Chain Matters to pose a question as to whether Apple supply chain has reached a scalability restriction.
For the past few weeks, business media has sent reporters out on specific assignments of investigating Apple suppliers, particularly Foxconn. The Financial Times has published at least two in-depth articles that summarize interviews with assembly line workers at Foxconn. They depict perceptions of stress, boredom and worker frustrations related to tedious manufacturing work and military style supervision. In one article, a social scientist at the Institute of Population and Labor Economics within China’s Academy of Social Sciences questions the longer-term reliance on very large numbers of younger workers for high volume manufacturing assembly work. An FT article also cites a survey among 200 companies indicating that just 70 percent of open manufacturing jobs in China can be currently filled. Supply Chain Matters continues to believe that the implication of all these developments will be the inevitable introduction of more factory automation in contract manufacturing.
At the last televised debate concerning the U.S. Presidential election, the moderator asked each candidate whether the one million plus manufacturing related jobs surrounding Apple’s supply chain would ever appear back in the U.S. No candidate dared to express a direct answer because of the inherent sensitivities, but the political sensitivities to OEM brand owners such as Apple sourcing I million manufacturing jobs across China is a building political concern. More importantly, by our thinking, the fact that any company’s supply chain presence becomes a topic of a U.S. Presidential debate is an indicator of perhaps too much visibility to Apple’s current supply chain deployment strategies.
With each passing week, high visibility product launch and quarterly earnings announcement, Apple will undergo much higher scrutiny to its offshore profit havens and subsequent supply chain sourcing and social responsibility strategies. No doubt, U.S. consumers will challenge Apple to justify current high product margins with some consideration for additional U.S. sourcing of supply chain related jobs.
In this current era of “the new normal of business” the norms of business are under constant challenge. Apple, who has demonstrated repeatable market and supply chain fulfillment success, has perhaps reached a point where its supply chain has become too visible.